What is a student credit card?
Studying full-time in the UK can be an expensive business, especially as a university student where you need to be able to afford accommodation, food, tuition fees and textbooks amongst many other things.
The main option available to those in higher education is a student loan, but in some instances, this isn’t always enough to cover the many expenses of being a student. It’s no surprise that students are forced to find other sources of funds during their time in university, whether it’s a job, or other borrowed funds just to cover expenses.
A student credit card is just one avenue that is worth exploring if you want to manage your finances a bit better as a student, so it’s worth finding out all the relevant information to see if it’s a good option for you. While you follow your career path, let the Guru show you the path to financial enlightenment too.
What is the best student credit card?
As a student you will be able to apply for a credit card at any point while you study, but if you are 18 years of age, the likelihood is that you will have a limited credit history or perhaps no credit history at all. This can make it difficult to apply for any credit cards that need a good credit rating.
Student credit cards normally take into account the fact that you might have a low credit score, so make it easy to apply and easy to get approved for. The best option is one that allows for this kind of borrowing, such as a credit builder card. This is not only a great option if you have a low credit score, but also allows you to improve your credit score over time so you have access to better financial products in the future.
Banks and building societies will often gear many of their financial products towards students, normally by offering rewards or benefits that would assist them while studying. Therefore, the best credit card for a student is one that allows you to borrow money, improve your credit score, and still accepts low credit ratings.
Do I need a student credit card?
The temptation as a student is always to spend money, especially with so many offers, social events and other everyday expenses to afford. It’s important to understand that whilst a student credit card is useful for many things, the primary reason for getting it should not be to borrow more money, as most credit cards that accept a low credit rating will only allow for limited borrowing. Instead, use the following reasons:
- To cover small expenses – since you will have a small credit limit, you should only use your credit card to cover everyday costs such as food shopping or
- To improve your credit score – having a credit builder card or any credit card where you can make repayments every month will slowly improve your credit score. This is ideal for those with no credit history
- To protect any purchases – under Section 75 of the Consumer Credit Act you will get extra protection for any purchases valued between £100 and £30,000. This means if an item purchased comes damaged or you aren’t able to return it due to company closure, you can claim the amount back through your credit card provider
- To pick up additional rewards or benefits – perks such as a young person’s railcard or discount off retail products will depend on the bank or building society offering the credit card
How to manage a student credit card
- Never borrow more than you can afford to pay back
- Set up a direct debit so you never pay late, and make sure you have enough funds in your bank account to cover the payment
- Know what your APR rate is and when you need to make repayments
- Never withdraw cash on your credit card – not only is this usually a very expensive way to borrow but it could harm your credit rating too as it’s viewed negatively by credit reference agencies
Stick to the rules and you could build a good credit rating for when you leave university and take advantage of features such as protection under Section 75 of the Consumer Credit Act. This is a piece of legislation that makes your card provider equally liable for goods and services worth between £100 and £30,000 purchased on your card.
You don’t even need to have paid for the full amount to get the cover and if your purchases are faulty, not as described or simply don’t show up, you can be reimbursed for the transaction or cost of repair. That’s a pretty good spending superpower.
Alternatives to a student credit card
If you feel that a student credit card isn’t an immediate priority and you need to borrow more money to cover expenses, you might want to think about an alternative. Have a look at the following financial products to help you on your way as a student:
- Student current account – if you don’t already have a student current account it’s a good idea to get one, simply as they normally come with an interest-free overdraft for you to use throughout your studies
- Overdraft – if you already have a current account, you can also apply to have an overdraft. This will give you a little cushion in case you have an expensive month, and with most student accounts it should be interest-free
- Guarantor loan – whilst you should already have a student loan or some sort of financing in place, there is also the option of a guarantor loan. If you can get one of your parents to be a guarantor, you should be able to borrow money to cover important expenses such as accommodation and tuition fees
Start your search
Before applying for any credit card, you should always check two things:
- Your eligibility – you can use our free moneymatcher comparison tool
- Your credit report – see what your current credit score is so you know if you will be accepted
If you have decided to apply for a student credit card, check out our selection of credit builder cards to see which one might be best for you.
Written by Robert Bester
Updated on 19th November 2019
Published on 2nd January 2018